Stifel maintains the region, which is trading on unchallenging multiples, should continue to perform well and with valuations across the region not looking stretched it remains positive on the sector.
In the past, emerging markets have been considered somewhat of a commodity play, but in a recent investment note Stifel argues the recent collapse in commodity prices and the rise of the technology sector means this is no longer the case.
This is demonstrated by the fact that in the last three years the technology sector has gone from being the third largest in the MSCI Emerging Markets Index to the largest, accounting for some 27% of the index at the end of August.
One fund which has embraced the rise of the tech sector is the £2.1bn Templeton Emerging Markets Investment Trust (Temit). It has more than 30% of its portfolio allocated to the sector, and as a result over the last 12 months to 4 September it has been one of the best performers in its sector, delivering a net asset value (NAV) total return of 35%.
However, with the trust still trading at a discount of 12.8%, Stifel argues there is still good value to be had in the sector.
Temit, managed by Carlos Hardenberg (pictured), has also been one of the latest funds in the sector to cuts its fees, reducing its management fee to 1% of NAV, down from 1.1%.
Stifel says this is a continuation of a trend which has taken pace across the emerging market trust space over the last couple of years as “funds compete to keep themselves as an attractive proposition relative to their peers as well as compared to passive solutions”.
In addition to Temit, Stifel says its other top pick in the sector is the £1bn JP Morgan Emerging Markets Investment Trust, which is managed by Austin Forey. Its NAV is up 15% over the last 12 months, but it still sits at 13% discount.
